Kevin L Belzer - WHERE TO TURN WHEN YOU'RE FACING FORECLOSURE

WHERE TO TURN WHEN YOU'RE FACING FORECLOSURE

Kevin L Belzer

Table Of Contents

Taking Back Control

What is Foreclosure?

Reasons People Go into Foreclosure

What Are Your Foreclosure Options?

What Happens at a Foreclosure Auction?

Deed of Trust and Trustee Sales

How to Avoid Foreclosure (Other Than Selling) 40

How to Avoid Foreclosure by Selling Your Home 56

Short Sales (And When They’re Necessary)

10. Understanding the Home-Selling Process

11. Upgrading with ROI in Mind

12. The Selling Process for a Home in Foreclosure 96

13. Where Will You Go?

106

14. Tips for Boosting Your Credit Score

116

15. Financial Tips for the Future

124

16. A Guide to Searching for the Right Home

130

17. A 12-Step Guide to Buying a Home

142

18. Home Loan Shopping 101

160

Testimonials Kevin was awesome from start to finish. Always kept me up to date with everything that was going on through the process. He gave great advice for pricing the home. I even got 15k over asking. He also stepped up and helped out with some yard work to get it looking perfect. His wife also came along and help make the inside perfect too. We had a little trouble closing but that came from the buyers side and title making some minor mistakes with paperwork. He was there to explain what was going on and not to worry. Thanks again Kevin for the awesome job!!! ~Robert Kevin was amazing. He took the time to make sure we had everything we needed and helped us through every step of the process. ~Jason Kevin worked above and beyond to help us get our home. He was incredibly helpful with each and every step of the process. He answered all our questions without hesitation and he took the time to be a real person, not just a realtor trying to sell a house. ~Jason and Stefanie I imagine this has probably been the most difficult sale for a home. Kevin did great job of communicating with us. Presenting our options. When we needed a change of lock box to combination Phil on a Sunday came out and change it. Little things big things. Divorce cases must be the most difficult ones. Kevin was a professional I would highly recommend him to my colleagues and friends. They bottom line we sold our house for best value. Thanks Kevin ~John

Kevin goes above and beyond when selling homes. He not only spends a lot of money to market the house but he also has the experience needed to negotiate and get top dollar. His passion and experience allows home sellers to know that they're in good hands when selling one of their largest assets. ~Phil Kevin was always ready to help us with any needs we had. Also always picked the phone up no matter what day or time. ~Joseph Kevin makes everything look easy. He’s knowledgeable, understanding, patient and inspires nothing but confidence. He’s our “realtor for life.” ~Karen Kevin was very attentive to what I needed in a new home and was very patient with me. ~Karen Kevin always answered any questions I had. He was always pleasant to talk to and he did everything he said he was going to do. ~Melanie E. Kevin has served me and my wife in a professional, honest, and friendly way. He helped us sell our home quickly and for more than we were asking. We would highly recommend Kevin to anyone wanting to sell or buy a home. I’d like to mention that he helped us purchase this house ten years ago and has assisted our son also. He is a nice guy and a great Realtor. ~ Chris and Kathy S. Kevin Belzer is the most professional expert in the field of real estate we have ever met. His honesty, integrity, and work ethic are second to none. His focus is centered on client satisfaction

and attaining the highest offer for a seller’s property by achieving optimum results. We are truly honored to have Kevin as our Realtor. ~ Pearl K. Kevin is very knowledgeable but it was his work ethics and tenacity that makes him above the rest. When a deal fell through by not fault of our own, Kevin worked over and beyond to get us the right house fast. We are in a better more beautiful house and we stayed on track because of Kevin. Kevin represents Go Sold Realty very well and we are blessed to have had the opportunity to work with him. ~ Bought a Single Family home in Gilbert, AZ. , AZ. Kevin went above and beyond my expectations. It was as if he took it personally to sell our house. Our first realtor had it listed for 4 months and had 7 showings. We fired our first realtor and hired Kevin with Go Sold realty. He got us a full price offer within 7 days of our house going live. He also had 8 showings during that week. I will absolutely recommend him to any of my friends or acquaintances in Arizona that are looking for a realtor. I just wish I had found him 4 months earlier. ~ Robert E. Kevin is a High Octane-Go-Getter! Knows the Valley really well and can tell you the ins and outs. Kevin picks up his phone and works hard through the entire process. Also, the people that he recomends are go-getters as well, we closed a week and a half early because his people were on top of everything!! ~ Edward Kevin helped me find my new home in AZ and I found him to be an invaluable resource, since I'm new to the area. He was always available to answer my questions about the buying process, and for information about the areas where I looked. I have used many professional realtors through the years but I'd

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rate Kevin at the top! I recommend him highly if you are in need of a competent, energetic agent to represent you! Thanks, Kevin and the Go Sold team, for making my house purchase an enjoyable and effortless experience! ~ Terry in Tolleson, AZ I can't sing Kevin's praises enough. From start to finish, he treated me with patience and kindness. His professionalism is unsurpassed. He was willing to take my calls/texts any time of the day or night. I will recommend him without hesitation! Oh, and the "welcome home" basket was a perfect ending to my purchase. ~ Bought a home in 2014. e in 2014. Kevin was a pleasure to work with. Always responded promptly to our questions and is very knowledgeable. He kept us up to date on the different properties we looked at and he helped with our offer on the property we purchased. ~ Mark H. Kevin is the ultimate professional and a joy to work with. After no luck with several other brokers in this sellers market, and about 5 months of frustration, I randomly contacted Kevin regarding one of his listings. That particular house wasn't right, but Kevin immediately knew what I was looking for, and offered great insight and market knowledge. Another week later, we found the perfect house, had an accepted offer, and closed the deal in 5 days! It was an amazing whirlwind of an experience, but a very positive one. I'd recommend Kevin to anyone looking to buy or sell, he really is The Closer! ~ Bought a home in 2013. e in 2013. I was referred to Kevin by a friend of mine. He had nothing but good things to say. I took his word for it. He helped me sell my home and we are currently working together to close on a new home. Kevin is very professional, friendly, and responsive. He

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was always there to answer any questions or concerns I had. The time of day didn't matter. The entire process was easy and worry free. He took care of everything. I will recommend him to my friends and family. ~ Sold a home in 2013. e in 2013. I can't say enough about Kevin. He made my dream come true!! I had been looking online for a place in Sun Lakes, and he was the first to answer my email about the properties. I had a list of 10 properties, and he got all the stats about each place. Then he set aside a day (I'm from out of state) to show me all of the ones I requested. I never felt pressured or rushed. In fact, he made me feel important as if I was buying a million dollar home! His professional knowledge and personality are a winning combination and is an asset for the people he serves. I highly recommend him. ~ Deb R. Kevin did a great job. I have to say that he was very responsive and timely. I wish he could have brought the price down a bit. The selling realtor has done a poor job. In fact its been two months and the realtor time lock is still on the front door. Kevin was totally professional and committed to meeting our needs. If you need a realtor, you need Kevin Belzer. ~ Kathy G . Kevin showed his professionalism through every step in the process. He made this transition as easy as possible and got us the most for our house. If I were staying here, I would recommend him to everyone. ~ Scott M. I cannot say enough of Kevin's commitment and work ethic in helping make this happen and on a very short schedule. Contacted about one dwelling that was unsuitable, he found one that was and worked day and night to make it happen on a very

short timeline in order that a family with small children literally not have to move to a shelter, and for very little return. My sincere admiration and appreciation for his professional knowledge and labor that made this possible. My enthusiastic recommendation. ~ John M. This is my third time working with Kevin, because I would never choose a different realtor. We met with him on a Wednesday evening in his office, reviewed the process and what criterion we were looking for in a house. The first house he showed us that night met perfectly to what we were looking for. By Saturday morning we had the inspection, on Monday we had the appraisal, and the process was a breeze from there. We could not be happier with our new home! Kevin made the process extremely easy because of his expertise and very quick response time. He is totally willing to answer any questions, or find someone that can. He is really an above and beyond guy. Thanks Kevin, we love our new place!! - cThis is my third time working with Kevin, because I would never choose a different realtor. We met with him on a Wednesday evening in his office, reviewed the process and what criterion we were looking for in a house. The first house he showed us that night met perfectly to what we were looking for. By Saturday morning we had the inspection, on Monday we had the appraisal, and the process was a breeze from there. We could not be happier with our new home! Kevin made the process extremely easy because of his expertise and very quick response time. He is totally willing to answer any questions, or find someone that can. He is really an above and beyond guy. Thanks Kevin, we love our new place!! - cThis is my third time working with Kevin, because I would never choose a different realtor. We met with him on a Wednesday evening in his office, reviewed the process and what criterion we were looking for in a house. The first house he showed us that night met perfectly to what we were looking for. By Saturday morning we had the inspection, on Monday we had the appraisal, and the

process was a breeze from there. We could not be happier with our new home! Kevin made the process extremely easy because of his expertise and very quick response time. He is totally willing to answer any questions, or find someone that can. He is really an above and beyond guy. Thanks Kevin, we love our new place!! ~ Alex and Mike. Thank you all. Great team work to make our new home a reality this quick. Appreciate every effort taken. Big BIG thank you to Kevin, Ryan to have set up things and being prompt. The overall experience was smooth and great. Again thank you all. ~ Abi This company did their job. Which is to say they didn't leave anything for me or others to do for them. Efficient. Great communication! I felt like my realtor treated myself like his own. Put the time in and was knowledgeable. Went out of his way to find me a replacement stove at the last minute. Pretty sure that wasn't his job but he took it upon himself anyway. I will remember this and have already told others :-) ~~ Alicia B SUPER GREAT REALTOR I had a buyer and seller from heck and Kevin handled the situation tremendously and efficiently keeping me informed of everything happening and always there to answer my questions. He priced my home above what other Realtors said it was valued at and got me an offer above asking price and SOLD my home in 3 days!!!! ~~ Sheryl C Kevin was wonderful to work with. He was understanding of our needs and limitations and guided us through the whole process with our end game in mind on our sale as well as purchase. He was very patient and understanding g as we worked through the process. I would recommend him for all of

your real estate needs ~~ Jim M

Kevin was wonderful! He made selling my house an easy and awesome process. He is the true definition of 5 Star service. He was there 100% guiding us through to make sure we experienced a smooth sell. You will never wait long for a response or update. I can’t say enough great things about Kevin. I wish everyone was lucky enough to work with Kevin for their real estate needs as he truly is the definition of someone with superior customer service. I’m so thankful to have worked with a great realtor and a wonderful person ~~ Amber M Kevin is the greatest, he helped us get on the right rack and sold our home in a short while. i would recommend him to anyone. ~~ Sally L If I could give Kevin 10 stars I would. He was referred to me from a family friend and he absolutely knocked it out of the park and went above and beyond this hands down was the best home buying process I’ve ever had. ~~ Dillon H I have bought two homes using Kevin as my realtor and would do it again. I highly recommend his services! Kevin is on top of everything and is great at communicating. He answered all of our questions and always made us feel like a priority. He always made time to meet us for showings right away and we knew that we could trust him to help us through the process and get us the best deal. We are so happy in our new home and so grateful for his help! ~~ Allesha S Customer service is A+. Working with Kevin a breath of fresh air! He's punctual, honest, sincere, and master knowledgeable

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about real estate. He can help you find painter, a brick layer, chimney sweep before, during or after your home transaction. He's a no nonsense, get things done gentleman. If you're looking for an agent, he is definitely your guy. ~~ Dru Great experience, great relationship built, great home purchased ~~ Kamron Johnson Kevin Belzer is BY FAR more superior to ANY OTHER REALTOR we have ever had in our entire life. Kevin is pleasant, brilliant, so professional and very aggressive to attain the very highest price for your home. His marketing techniques are truly second to None. He sold our home for $80K MORE than any other realtor could offer to us. Please give Kevin a chance and you WILL NOT be disappointed. ~~ Pearl

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Preface When you’re facing foreclosure, it is easy to feel like you don’t have any control over the situation. What you are feeling is natural. Hundreds of thousands of Americans have gone through very similar situations and experienced similar feelings. However things look like to you now, I’ll make you a promise: You’ll get back on your feet. How can I make such a promise? Because I have been where you are. I lost my home in the early 2000s. Since then, I rebuilt my credit and have owned my current home since 2009. This book is my gift to you. It is a resource I wish I had when I was faced with foreclosure 20 years ago. My mission is to help your family get through these tough times. Once you read the book, you are likely going to have a lot of questions. Feel free to reach out and let’s see how I can help you get your home sold. You ARE ALLOWED to sell your home when in pre foreclosure and HAVE THE RIGHT to any profit after paying off the lender. When I first ventured into the real estate industry years ago, I did so with the hopes of helping sellers like you avoid the headaches often associated with the home-selling process. In my years of experience, not only have I helped alleviate the stress of selling for numerous clients, but I’ve also accumulated years of knowledge to help them get more money for their homes in the least amount of time. I decided to share all of my expertise in one place with potential xv

clients. And that’s why you’re receiving this book. I want to help you have the best possible home-selling experience. And by that, I mean I want you to 1. Get the most money possible for your home, 2. Sell in the least amount of time, and 3. Avoid the headaches most commonly associated with the home-selling process. Think of this book as my gift to you. It contains insider advice on the home-selling process to help you achieve your ultimate real estate goals, including:

• Secret strategies to sell your home for more money • Marketing techniques employed by top agents • Advice on how to appeal to today’s buyers • And much, much more

If, after reading through it, you want to hire me to help you sell your home, I’d be more than happy to meet with you to discuss a specific plan to sell your home. Happy reading!

~ Kevin Belzer

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CHAPTER 1 Taking Back Control

If owning your own home is a big part of the so-called American Dream, then losing your house through foreclosure can feel like a nightmare. Bad things happen to good people every day, but it doesn’t define who you are. Logic tells us that a house is just four walls; it’s you and those whom you love who turn any house into a home. But in the middle of a foreclosure situation, it can feel like the world — or, at least a big part of it — is ending. When you’re facing foreclosure, it’s easy to feel like you don’t have any control over the situation. What you’re feeling is natural. Hundreds of thousands of Americans have gone through very similar situations and experienced similar feelings. However things look like to you now, I’ll make you a promise: You’ll get back on your feet. And this book was written to help you do just that. If the Great Recession taught us anything, it’s to be prepared for the unexpected impact world dynamics can have on our personal lives. Yet a Freddie Mac/Roper poll discovered that more than 60% of homeowners who are delinquent in their mortgage payments are unaware of services that some mortgage lenders offer that would help them. Most of these alternatives are poorly

publicized, but in this book, we’ll explore some of them together.

This book is your resource. You need, and deserve, a resource that provides you with a good starting point in managing the process of foreclosure. This book is designed to give you a head start in that process. When you make the decision to sell your home — or take other proactive measures to save yourself from foreclosure — you take back control of your life and become a part of the decision. Don’t let other people make your decision for you. Before we get started, I make this pledge to you: I’ll help you the way a good friend would, and I’ll do it without judgment, without bias, and without asking anything in return. When it’s useful, I’ll direct you toward other resources. The guidelines I present in this book will help to prepare you personally and financially to cope with foreclosure and to develop your strategy for turning the foreclosure process into opportunities!

YOU'RE NOT ALONE

Foreclosure is far more common than you might think. A study conducted by the Federal Deposit Insurance Corporation (FDIC) found that one in every 200 homes will be foreclosed.

Let’s put that number in perspective; in a city the size of Washington, D.C., that means 3,000 residents will lose their properties every year. According to the Mortgage Bankers Association, in the U.S., one child in every classroom is at risk of losing their family home because their parents can’t pay the mortgage. Every three months, 250,000 new families enter into the foreclosure process. Remember the Great Recession and the years

that followed? From January 2006 to April 2016, more than 6.3 million foreclosures were completed. Foreclosures hurt all of us. In a 2005 Chicago case study, researchers William C. Apgar, Mark Duda, and Rochelle Nawrocki Gorey found that a single foreclosure can cost local governments up to $34,000 for inspections, court actions, police and fire department efforts, potential demolition, unpaid water and sewage, and trash removal. Additionally, the foreclosure can have a negative impact of $220,000 on the equity and property values of nearby homes. Communities and regulators have begun to realize that getting you the help you deserve is in everyone’s best interest. Foreclosure can happen to anyone if the circumstances for it are present. It’s a misconception — and it’s incredibly unfair — to judge anyone’s success based on their foreclosure experience. Often, the more success you have, the more likely you are to buy an expensive house, to invest in a wide range of assets, or to participate in blockbuster deals with other participants. For those reasons, these “successful” people are often vulnerable to a downturn in the economy or housing market; a personal financial setback; and/or a complication arising from the actions of a partner, spouse, or co-investor. What do music entertainers Paul McCartney, Rihanna, Billy Joel, and R. Kelly have in common with actors Kim Basinger, Nicholas Cage, and Kristen Bell and athletes such as Evander Holyfield, Terrell Owens, and Allen Iverson? You guessed it; these are only a few of the famous personalities who have faced foreclosure at some point during their careers. Some managed to save their houses because of a turnaround in their luck or the last-minute intercession of a friend. Some lost the houses they loved. Others found ways to avoid foreclosure by pursuing sensible alternatives, the same alternatives that might

just be available to you. But one thing is clear: Foreclosure didn’t define them, and it doesn’t define you, either! We’ve seen how an entire industry has grown up around the practice of lending to home buyers. Fortunately, an entire industry also has been growing to meet the needs of individuals who require help and protection in the foreclosure process — individuals like you. This book is your roadmap, your way out of the foreclosure maze! We’ll begin in Part 1: The Ins and Outs of Foreclosure, by examining what a foreclosure is … and what it’s not. The truth might surprise you in ways that you find encouraging. We’ll talk about why homes go into foreclosure and we’ll look at some of the nuts and bolts of the process, such as deeds of trust, trustee sales, and what happens at a foreclosure auction. We’ll also begin to outline some of your options. In Part 2: How to Avoid Foreclosure, we’ll explore your options in greater depth, with an eye to helping you develop your foreclosure strategy. Some of these options could possibly help you avoid having to sell your home. Others will focus on selling your home yourself, giving you greater control over the outcome, including the terms and potential profit you could make off of the sale. Part 3 takes a deeper dive into The Selling Process to Avoid Foreclosure. You’ll quickly develop a better understanding of the home-selling process and how that process differs when you’re facing possible foreclosure. You’ll learn about: • short sales (when they’re necessary); • ways to improve your chances of selling; • common seller mistakes to avoid; • how to upgrade your home in ways that will maximize

your return on investment (ROI); and • how to negotiate so that you have the advantage.

Part 4 is all about Moving Forward and the road to foreclosure recovery. This includes resources you can use to find and relocate to a new home, if necessary. The goal is to emerge from the foreclosure process financially stronger so that you never again find yourself in the same disadvantaged position. You’ll learn tips for improving your future finances, including effective ways to boost your credit score. Part 5 will focus on Finding Your Next Home when you’re ready. Together, we’ll explore how to search for the right home while avoiding common mistakes buyers make. You’ll want to use my 12-Step Guide to Buying a Home and learn the basics of shopping for a loan. I also provide a handy “do’s and don’ts” section on negotiating from a home buyer’s perspective. As you read this book, always keep in mind that legal advice varies according to where you live as well as your individual circumstances. Consult a competent real estate attorney for all your legal needs. Above all, remember that even if your house undergoes foreclosure, you and your loved ones will go on. Within you, you still possess all the tools you need to build a wonderful future filled with happiness, contentment, and success. How you meet the foreclosure challenge will enable you to get past this difficult period — to thrive , not just survive. So, let’s get started!

CHAPTER 2 What is Foreclosur eclosure?

So, what exactly is foreclosure, and how do good people find themselves stuck in the foreclosure process? As part of the loan agreement, you agree that the house you’re buying will serve as collateral for the loan. This means that if you stop making payments, the lender can take possession of the home and sell it in order to recover the money they loaned you. If you’re a few days late on a mortgage payment, there is no reason to panic. The bank is not going to take away your house for this. Most mortgage contracts will give you a 15-day grace period and will add a 5% late fee on payments made after that grace period. Chances are, you only get into trouble if you’re more than 90 days late. Note: Please check with your bank or mortgage lender to find the exact terms and conditions. At this point, the bank will issue a “Notice of Default” with the County Recorder’s Office. A letter will be mailed to you, notifying you that you’ve defaulted on your loan. You’ll be given 90 days to pay off the debt. Your house is now at what is called 8

the pre-foreclosure stage. This means that the bank hasn’t taken possession of your house yet. If you fail to pay off your loan after the notice, your property officially enters foreclosure and your bank will take possession of the property. They then sell it to recoup their money. This process can take a while. For example, in New Jersey, the average time it took for a foreclosure to complete in 2017 was 1,347 days — the longest in the nation. According to RealtyTrac’s U.S. Foreclosure Market Report, the average nationwide foreclosure took 883 days. While the paperwork is winding its way through, you don’t have to move out, but when the process is complete, you’ll receive a notice to vacate. (In most states, you have between five and 30 days to leave.) You’ll also receive a “Notice of Sale,” which states that the property will be sold at auction, and it lists the date, time, and location of the auction. The lender publishes the Notice of Sale in a newspaper in the county where the home is located for three consecutive weeks prior to the auction date.

NONJUDICIAL FORECLOSURE

Some states allow lenders to foreclose and repossess your property without the necessity of obtaining a court order. The California Department of Real Estate’s Homeowner’s Guide: The Foreclosure in California defines this judicial foreclosure as, “a privately conducted but publicly held sale.” The trustee is not obligated to obtain a court order before foreclosing and repossessing your home. This streamlines the process in a way that favors the lender. Your only recourse to stall the foreclosure auction might be to file suit against the lender, giving you an opportunity to “make your case” for a postponement.

Most states’ laws (31 states, plus Washington, D.C.) permit nonjudicial foreclosure: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Washington, D.C., Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (sometimes), North Carolina, Oklahoma (unless the homeowner requests judicial foreclosure), Oregon, Rhode Island, South Dakota, (unless the homeowner requests judicial foreclosure), Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming.

JUDICIAL FORECLOSURE

Judicial foreclosure occurs under supervision of the court. It is a more borrower/homeowner-friendly process that requires legal filings, court-imposed notices, timelines, and hearings. In a judicial foreclosure jurisdiction, the mortgagor goes to

court to initiate foreclosure proceedings. It can take several months or even longer for a judicial foreclosure. Another advantage to the homeowner is that any legal defenses to the foreclosure may be raised (without the owner having to file a lawsuit). Judicial foreclosure proceedings are required in Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico (sometimes), New York, North Dakota, Ohio, Oklahoma (if the homeowner requests), Pennsylvania, South Carolina, South Dakota (if the homeowner requests), Vermont, and Wisconsin. In most cases, the borrower must be more than 120 days

delinquent in payments before the lender can start a foreclosure. The lender sends a letter, notifying the borrower of their intent to begin foreclosure proceedings and specifying a period within which the borrower must respond (usually between 20 and 30 days). Regardless of which kind of foreclosure process your state mandates, unless you respond, the chances are excellent that the foreclosure will go through. The court will issue a default judgment that authorizes the lender to sell the home. If the borrower responds, a hearing is scheduled in which the borrower can tell a judge why foreclosure shouldn’t be permitted. The better the defense, the longer the process will drag out. If the court decides in the lender’s favor, it will enter a judgment ordering the sale of the home to satisfy the debt. If the property is not sold at the foreclosure sale, ownership goes to the lender. Even when the borrower loses ownership of the home, most state laws don’t require moving out immediately. Typically, the tenant can remain in the home, payment-free, until receiving an official, written eviction notice. It’s often more practical to move out prior to eviction.

EMOTIONAL COMPONENTS

In the Introduction to this book, we touched on the fact that facing the prospect of foreclosure can affect our mood and thinking process. Foreclosure can seem overwhelming, and when we’re overwhelmed, it’s hard to think productively. You might have read or heard about the five stages of grief: denial, anger, bargaining, depression, and acceptance. This model was created to demonstrate the emotional states that terminally ill patients experience after a diagnosis. Since then, it’s been loosely applied to everything from a bad breakup to the death of a loved one.

It’s natural for individuals and families faced with the prospect

of foreclosure to experience their own range of emotions. Many homeowners experience self-doubt. “If only I had done things differently,” they tell themselves. But reasons for foreclosure are almost always more complicated than the actions of one individual. Consider job loss, for example. Were you or your partner laid off from a job? Your employer ultimately made that decision, and the reasons were probably more complex than they seem. Did the economy — or management’s own poor decision making — make layoffs necessary? Did the company where you worked experience a sudden loss of business because of fewer customers, seasonal buying habits, rising material costs, or other conditions beyond your control? Perhaps your former employer had to cut costs or eliminate an entire product line. Maybe new owners or managers simply wanted to start with a “clean slate” and hire their own people. Regardless of the reason or reasons for the layoff, your employer made a final call that you (or your partner) did not choose. Did you or a loved one experience a serious health crisis? In most cases, that’s not something you could have foreseen or controlled. Health insurance remains a hot political topic that we won’t tackle here. Regardless of the reasons, the inadequacy of health insurance coverage is a reality for many Americans. Was foreclosure the result of a divorce or breakup? A troubled relationship is rarely the fault of only one partner. It takes work by two willing and committed individuals to make a relationship succeed. Imagine how much harder it can be to work through the foreclosure process when you and your partner aren’t on the same page. Further, as we learned during the Great Recession, the need for many foreclosures could have been averted if lenders had applied realistic guidelines for qualifying home buyers in the first place

— and if government had exercised responsible oversight over the lending process. There’s plenty of blame to go around, but you’re not to blame for wanting to give yourself and your family an opportunity to experience homeownership. Researcher Robert D. Dietz determined that homeowners tend to be happier and healthier, both physically and emotionally. They participate more in political and community activities, including voting. Their children tend to perform better academically and experience fewer behavioral problems. Who wouldn’t want these things? Whatever the underlying cause of your foreclosure, it feels terrible to you, and it’s natural to experience a range of difficult emotions. Mastering these emotions is a crucial first step in dealing with the problem. Remaining stuck in denial or unhappiness about the situation can prevent you from taking action at a time when prompt action is exactly what you need to explore and implement your alternatives.

LOSING CONTROL

It’s common and natural to feel that you’re losing control. After all, a bank or other lending institution — some faceless corporation — seems to be calling all the shots. They’re dictating what you can and cannot do, trying to force you to leave the dwelling where you want to stay, and they’re setting the timeline. The lender has many experts at their disposal: Lawyers to clarify their legal options and draft contracts. Lobbyists to influence legislation. Economists to figure out where the local and national real estate and investment markets are headed. Marketing experts to figure out how to influence your real estate buying habits. Accountants to tabulate everything.

On the surface, these experts might seem to be aligned against

you at foreclosure time, and that gives the impression that they hold all the cards. The truth is, there are laws to protect your interests, even in foreclosure. You have resources and options available to you, even if they’re not readily communicated to you. Facing your options in a foreclosure can feel like confrontation. We’ve been raised to believe that banks and other lending institutions are powerful, faceless adversaries. In that sense, they are unknowable, and it’s easy to fear the unknown. Many homeowners put off contacting their lender because they’re embarrassed to do so. The Freddie Mac/Roper poll also found that homeowners avoid contacting the lender because they don’t believe the lender can help them. Some even believe alerting the lender will accelerate the process of losing their home.

TAX IMPLICATIONS FORECLOSURES

It almost seems impossible that after undergoing the misfortune of a foreclosure, you could get hit with the “double whammy” of having the Internal Revenue Service insist you pay income taxes or capital gains on

the foreclosure transaction. You’ve just had your home taken away from you because you were unable to make all of your mortgage payments on time! How is that a red flag for the IRS? Here’s how it can happen. Your lender originally based your mortgage loan on the value of the property you were buying. When your property is foreclosed, the title changes hands from you to the lender and/or trustee. A new tax assessment is

performed. Property values fluctuate, so it’s possible the value of your home has declined since you obtained your mortgage loan. In fact, the trustee will often have to sell it for less than its initial value — and less than the amount you owe — simply to get rid of it and keep from taking a loss. (This is known as an underbid. ) If the lender sells the property for less than it was worth when you bought it, it will look as though a large part of your mortgage debt was forgiven by the lender. In other words, the lender loaned you money that you don’t have to pay back now. To the IRS, that looks like income! It looks as though you’ve benefited from a sizeable windfall, and the federal government may demand its share of taxes for income and capital gains! Some exceptions apply. For example, if you’ve recently gone through bankruptcy or are otherwise dealing with insolvency, you might not be subject to this kind of taxation. This would be an excellent time to consult your accountant or tax attorney to find out whether you’re required to file special paperwork with the IRS and to determine what the impact might be on your individual situation.

POINTS TO REMEMB O REMEMBER:

• It’s usually not a crisis to be late on a mortgage payment. Repeatedly missing payments can trigger the bank to issue a “Notice of Default” and begin foreclosure proceedings. • Foreclosure usually takes some time. You probably won’t need to move out immediately, but you should immediately start working on your foreclosure strategy. • Foreclosure can subject individuals to a range of emotions. Controlling those emotions and making good decisions can set the stage for future success and

happiness. • Don’t overlook the fact that foreclosure can have severe tax implications if debt that is now forgiven is considered to be income. • Move promptly and take control in response to a foreclosure. The sooner you explore your alternatives and take necessary steps, the better your outcome is likely to be.

CHAPTER 3 Reasons People Go eople Go into Foreclosur eclosure

WHAT CAUSES FORECLOSURES?

Buying your own home can be a wonderful, exciting adventure. Unfortunately, making regular mortgage payments and paying for home upkeep and improvements can add a lot of stress to your life and your budget. Statistics show that many homeowners already are at the financial edge: • An estimated 43% of American households spend more than they earn each year, according to the Homeownership Preservation Foundation data of 60,000 homeowners. • A MetLife study found that 52% of employees live paycheck to paycheck.

• Nearly 42% of all American households do not have enough in liquid financial assets to support themselves for at least three months. • Overall, 46% of American households have less than $5,000 in liquid assets, including IRAs, according to researchers for the Levy Economics Institute of Bard College. If we consider the statistics above, it’s obvious that many homeowners are in tough financial situations even before a possible foreclosure. Foreclosure has a way of ratcheting up our stress levels, and stress — an unwanted ingredient in any recipe — can cause us to respond emotionally. Supply and demand are always changing. In times when plenty of people have the resources and desire to purchase homes, builders start building more to sell. Inevitably, the housing market reaches saturation, the point at which the supply of available homes meets and even exceeds the demand. The overall economy can also have a dampening effect on the ability to afford homes. Times of high unemployment force many people to lose the incomes they rely on to make their mortgage payments. Even those with jobs may be “underemployed” or find their work hours and income reduced. Less money to spend means fewer people can afford to buy homes. When the real estate market slows down, sellers tend to lower their prices to make homes more appealing. A price drop lowers the values of existing homes, too. Many homeowners seek to refinance as a way to regain stability and meet their monthly financial obligations. If you have an adjustable rate mortgage, you might find the mortgage rate is rising, even as the value of your home is dropping. That takes an opportunity to refinance off the table.

When housing values plummet — every bubble bursts, eventually — you can be left with negative equity. We call this an underwater or an upside-down mortgage, which means that you owe more on your mortgage than the house is worth. For example, your home might be worth $300,000, but you owe $350,000 on the mortgage. A study of Homeownership Preservation Foundation data of 60,000 homeowners nationwide revealed many “tipping points” that cause homeowners to go over the edge financially.

TIPPING POINTS

Tipping points that put homeowners over the edge:

• 32% experience a job loss • 25% experience a health crisis • 85% have already missed one mortgage payment • 50% have already missed two payments • Most have no savings, no available credit, and their extended families have limited resources. • Most have first-time loans, and most loans are less than three years old. • They may have already refinanced two or three times. Notice in the statistics above that most of the homeowners who risk going “over the edge” have had their first-time mortgages for less than three years. According to a Freddie Mac/Roper poll of more than 2,000 U.S. homeowners, 60% of respondents wished they understood the terms and details of their mortgage better. The “legalese” of a mortgage contract can be intimidating, especially for those who are new to homeownership. There are different reasons that could cause someone to default 20

on their home loan. The number-one reason for foreclosure differs by state and region. Few choose to go into foreclosure voluntarily. It’s often an unpredictable result of a host of reasons. Let’s take a look at some of the current economic theories for the distressed housing market. As we discussed earlier in this book, when the economy collapsed some years ago, foreclosure became a fact of life for millions of Americans. About 250,000 new families enter into foreclosure every three months, according to the Federal Deposit Insurance Corporation (FDIC). The Great Recession showed us how bad the situation for homeowners could become when a housing bubble bursts. A study in 2007 by the Federal Reserve Bank of Boston found that home values are a huge contributing factor to foreclosure. According to the study, homeowners whose home value dipped by 20% or more were about 14 times more likely to go into foreclosure than those who witnessed a 20% increase in the value of their home. During the Great Recession, many homeowners with “underwater” mortgages made the unfortunate decision to simply walk away and stop making their payments. They chose — or felt they were forced — to ignore the many harmful ramifications to their credit and personal lives. In some cases, selling their home did not seem like a viable option for them. Countrywide Financial also cites economic performance as a cause of foreclosures. In its 2007 survey, Countrywide found that the main reason for foreclosure, was “curtailment of income” (58% of the time). This far exceeds some of the other reasons, such as: • Illness or medical reasons made up 13% of foreclosures. • Divorce accounted for 8%. 21

• An inability to sell the house clocked in at 6%.

Surprisingly, payment adjustment on a mortgage was cited as a reason just 1.4% of the time. Other reasons noted include:

• Job loss • Job transfer or relocation • Deceased family member • Excessive debt and mounting bills • Maintenance issues they can no longer afford

Any one of these factors, even several of them at once, could cause homeowners to default on their home loans, putting them at risk of foreclosure.

POINTS TO REMEMB O REMEMBER:

• Many Americans live on tight budgets and are vulnerable to a downturn in the economy, housing market, or their personal financial situations. • Situations such as a job loss, a health crisis, or other problems can create a “tipping point” that will prevent you from making timely mortgage payments, or even compel you to default on your mortgage. • If you owe more on your loan than your home is worth, your mortgage is said to be “underwater” or “upside down.” • Homeowners whose home value dips by 20% or more are 14 times more likely to go into foreclosure than those who witnessed a 20% increase in home value.

CHAPTER 4 What Are Your Foreclosure Options? e Options?

Because the process of foreclosure can be lengthy (between 2–12 months), you may have time to save your home — particularly if you live in a jurisdiction that provides a long redemption period. You should act quickly and according to a plan. Depending on the process, either non-judicial or judicial, you’ll have a certain amount of time to get your affairs in order. If your goal is to save your home, as it should be, you need to ensure you start repaying property taxes and homeowner’s insurance, if both are applicable. Otherwise, you will compound your problems and be hit with additional tax liens, or even a liability suit or casualty loss.

READ THE FINE PRINT (ALL O RINT (ALL OF IT)

Once the process has begun, you must carefully review all the correspondence that you’ve received from your lender. Make notes on the

phone conversations with your lender, who spoke with you, when, and what the nature of the call was. You should also review your mortgage documents as an added measure. Reviewing your documents will help you determine which steps are available to take. For example, if a power of sale clause is involved, then the sale of your home to pay off property taxes or your mortgage will pay back the payments that you’ve missed. If you can work around this, and get the money some other way for your property tax payments, then you’ll be able to pay them back without having to put your home up for sale and lose it. Do some additional research into the foreclosure laws that apply to your state, and find out the information needed to answer the following questions: • What is the timeline for the foreclosure? • Are there any deficiency judgments applicable that will hold me personally responsible for the difference between my loan’s outstanding balance and what my home will sell for? • Is right of redemption available to me as a grace period in which I can reverse my foreclosure? During the 90-day waiting window, the homeowner has the right to redeem their mortgage. This means that you get the chance to pay off the mortgage and save your home. However, you have to pay the full amount you owe the lender. This includes the interest and any late fees as well as any costs incurred in the foreclosure process.

SHOULD YOU WALK AWAY?

It’s natural for your first reaction to the threat of foreclosure to be one of denial or avoidance. Early in the foreclosure process, it’s easy to get stuck in the denial stage, telling ourselves, “I can’t believe this is happening to me!” Sometimes, it seems that the easiest and least painful way to deal with the situation is to just do nothing.

Some homeowners are tempted to just “walk away” from their mortgage when they can no longer make timely payments. If you’re thinking of walking away, there a few things you should know before you make that decision. A foreclosure dramatically affects your credit score. Your credit score will take a drop of 85 points to 160 points after a foreclosure (some sources say even more). This may affect your ability to buy another home for years to come. A foreclosure remains on your credit report for up to seven years. Your credit scores can also affect other areas of your life, such as your insurance rates, phone credit and, in some limited cases, your ability to get a job.

OPTIONS AVAILABLE TO YOU

There are various alternatives to foreclosure that you may be able to pursue, including loan modification, deed in lieu of foreclosure, or short sale. We will examine each of these in depth in subsequent chapters. You could be able to negotiate your way out of a foreclosure. Contact your lender as soon as you realize that you’re having

serious difficulty making your payments. You might be able to negotiate a new repayment plan or even refinancing that suits your current financial status. According to Mortgage Banking magazine, low- and moderate-income borrowers who engage in repayment plans are 68% less likely to lose their homes. Those are attractive odds. Different states have different foreclosure rules. Find out what your rights are and, most importantly, how long you can stay in your home once the foreclosure process commences.

AVOIDANCE COUNSELORS

A call to a foreclosure avoidance counselor is going to be one of the most important phone calls you will make during the process of

foreclosure. Calling a foreclosure avoidance counselor, one who is fully approved by U.S. Department of Housing and Urban Development (HUD), will help you to figure out your situation. These counselors will explain the laws of foreclosure in your state, will typically work free of charge, will help you organize your financial documents, will help you discuss alternatives for foreclosure, and might represent you when it comes to negotiations with your lender. Once you begin working with one of these counselors, you need to let your lender know — right away. This will help your case when it comes to demonstrating your resolve. This may help you to avoid losing your home, as those who receive help with a counselor can even reduce the payments for their property tax or mortgage, when compared to someone who doesn’t use such help.

A WORD OF CAUTION

Be sure to check whether the foreclosure avoidance counselor is approved by HUD, because unsolicited offers for help are common when it comes to foreclosure rescue scams. Be careful whom you choose to handle your foreclosure strategy, because there are lots of scammers out there looking to profit from your misfortune. This is a very emotional period, and it’s easy to get confused, so get everything in writing and understand the fees and contract involved. Your attorney can be an essential resource in this effort. If foreclosure proceeds, you will get evicted from your home. You’ll consequently lose your home as well as the equity you have accumulated so far. In addition: • You could owe a deficiency balance after the foreclosure sale. This is the balance accrued if the sales proceeds are not sufficient to cover all costs. • You forfeit the ability to get a Fannie Mae (Federal National Mortgage Association) mortgage. Fannie Mae is a government-sponsored enterprise and leading source of financing for mortgage lenders. If you do nothing in response to your foreclosure notice, your house and property will go to a foreclosure auction, which we will discuss in the next chapter.

POINTS TO REMEMB O REMEMBER:

• Depending on the state in which you live, and the type of foreclosure action being taken, there may be time to save your home — if you act quickly.

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